How Does Early Assignment Work for the Seller of an Option?
When an option is exercised early, the seller is "assigned" the obligation. For a put seller, assignment means they are forced to buy the underlying asset at the strike price.
This happens when the buyer exercises their right. The seller must then deliver the cash to purchase the asset, typically at a loss if the option was ITM.
Glossar
Assignment
Obligation ⎊ Assignment in options trading refers to the mandatory fulfillment of the contract terms imposed upon the option seller, or writer, when the buyer chooses to exercise their right.
Option Seller
Strategy ⎊ The Option Seller, within cryptocurrency derivatives, fundamentally assumes a short position, profiting from a decline in the underlying asset's price or volatility.
Early Assignment
Assignment ⎊ In the realm of cryptocurrency derivatives and options trading, early assignment denotes the preemptive exercise of an option contract prior to its standard expiration date.